Daily Briefing: Syria fallout - U.S. eyes new Russia sanctions

LONDON (Reuters) - The diplomatic fall-out over Syria intensifies on several fronts today as the United States is due to announce new economic sanctions on Russia aimed at companies it alleges were dealing with equipment related to chemical weapons use.

Anti-war demonstrators take part in a protest in New York City, April 15, 2018

Separately, EU foreign ministers meet in Luxembourg to discuss their response: while the EU has said it is ready to step up existing sanctions imposed on Syria, it is not clear how any new steps would fit in with the planned U.S. action.

Talks restart today on what could be the decisive round of wage negotiations between Germany's public sector unions and employers, with both sides saying progress has been made. Unions indicated willingness to compromise on their demand for a 6 percent pay rise; the government official leading the talks said he hoped for a deal in the next 48 hours.

It was a restive weekend in central and eastern Europe. Tens of thousands of Slovaks turned out on Sunday to demand more government resignations after the murder of a journalist that sparked a political crisis and already brought down a prime minister. Demonstrators now want the police chief and the special prosecutor out and a crackdown on corruption.

That came a day after similar numbers of Hungarians protested in Budapest on Saturday against what organisers said was an unfair election system that gave Prime Minister Viktor Orban a landslide victory.

MARKETS

World market reaction to the missile strikes on Syria has been equivocal so far, with some “relief” gains that the operation went off without engaging Russia militarily but with some trepidation remaining over next steps and rising tensions between the Western powers and Moscow.

While U.S. and European stock futures, Japan’s Nikkei and South Korea’s Kospi all pushed slightly higher on Monday, Shanghai and HK markets fell sharply on worries that slowing credit growth and tightening regulatory requirements will start to weigh on the Chinese economy as Q1 GDP numbers on Tuesday are awaited.

An early retreat for the safe haven yen reversed quickly too, even though 10-year U.S. Treasury yields sustained their bounce to hold above 2.84 percent.

Even though some analysts said Friday’s strikes on Syrian chemical research facilities looked to be a one-off, Russia has since warned of global “chaos” if it happened again.

Shares in Rusal skidded almost 30 percent in response to the U.S. warnings, although the rouble firmed slightly after initial losses of more than 1 percent.

Markets will look to U.S. Q1 earnings, with Bank of America and Netflix due to report. U.S. March retail sales numbers are due out amid some concerns about a loss of economic momentum more generally.

On the European corporate front, shares in WPP fell 4 percent after Martin Sorrell, who built the world's biggest advertising agency through 33 years of dealmaking, quit on Saturday after an allegation of personal misconduct.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own. —